Hess crafts plan to spin off gas stations

Hess Corp, which came under pressure from activist investor Paul Singer to streamline operations last year, filed paperwork Wednesday for the spinoff of its gasoline stations.

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By Jim Polson

capecodtimes.com

By Jim Polson

Posted Jan. 9, 2014 at 2:00 AM
Updated Jan 9, 2014 at 7:33 AM

By Jim Polson

Posted Jan. 9, 2014 at 2:00 AM
Updated Jan 9, 2014 at 7:33 AM

» Social News

NEW YORK — Hess Corp., which came under pressure from activist investor Paul Singer to streamline operations last year, filed paperwork Wednesday for the spinoff of its gasoline stations.

The separation would be tax free and distribute all shares in newly formed Hess Retail Corp. to holders of Hess Corp., according to a filing by the New York-based company. Hess will continue to seek a buyer for the unit while pursuing the spinoff, which may occur this year, said Dennis Moynihan, a company spokesman.

Hess is the largest owner of convenience stores along the East Coast with operations in 15 states and the District of Columbia, according to the filing. Its holdings include an extensive network of stores on the Cape, many of which were acquired from former owner Christy Mihos in 2009.

Hess announced last year it would close or sell its refineries and divest the retail business to focus on oil production and exploration after criticism from Singer's Elliott Management Corp.

"I, for one, am in favor of a spin because it will keep the Hess brand name which has some value and the company won't pay any taxes," Fadel Gheit, a New York-based analyst for Oppenheimer & Co., said Wednesday in a phone interview. The business may be worth $2 billion, although a competitor seeking to rebrand the outlets might pay less, said Gheit, who rates Hess shares a buy and owns none.

The filing leaves undetermined the amount of stock each Hess holder would receive in Hess Retail, which would trade on the New York Stock Exchange as HRE. It also doesn't specify a date for the spin. No shareholder vote is needed to approve the action.

Hess operates 1,258 fuel and food outlets from Florida to New Hampshire and is the largest Dunkin' Donuts Inc. franchisee by number of sites, according to the filing. The business includes 81 travel plazas, including interstate highway stops that are as large as 10,700 square feet.

The company had $943 million invested in the retail business as of Sept. 30, according to the filing.

Hess outlets are branded as Hess, Hess Express and Wilco Travel Plaza. The company agreed last month to pay $290 million to buy out its partners in Hess Wilco Holdings, in which it held a 44 percent stake.

The spinoff filing was issued before the start of regular trading in New York. The company has been selling assets and streamlining operations.

Hess supplies all the motor fuel for its branded stations. After the separation, the unit would buy 75 to 80 percent of its fuel from third parties under long-term contracts, with the rest bought on spot markets.

Hess, which is run by the son of founder Leon Hess, makes toys it has sold annually at its gasoline stations since 1964. After the spinoff, the stations would continue to sell the toys, which would be designed and manufactured by the former parent company under a planned agreement, according to the filing. The green-and-white models have ranged from tanker-trailers to equipment haulers.